LCUT - Earnings call 3 2023 | Lifetime Brands, Inc.

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Operator

Good morning, ladies and gentlemen, and welcome to Lifetime Brands' Third Quarter 2023 Earnings Conference Call. [Operator Instructions] I would now like to introduce your host for today's conference, T.J. O'Sullivan. And Mr. O'Sullivan, you may begin.

Unknown Executive

you. Thank thank Lifetime and XXXX Third for Call. Earnings you morning, Brands' joining Quarter Good from Rob management Officer; today us With are Winoker, Financial and Kay, Chief Officer. Larry Executive Chief

you upon Reform from our are contain forward-looking available the to as company the Litigation that in the Private like contained by Any influence call, the Before Securities performance developments. to today's date the factors filings qualify of liability are company safe statements subject required obligation statements as are hereof the remarks our future and statements. statements law, based company, to with not Securities we may to for for and relate the begin other these remind the Such established such highlighted morning to by does this information that guarantees are and Act. update in future any such I'd Except protection Commission. of future change of to harbor and the factors our press intended results are could Exchange that and release, not are undertake performance, statements

measures in these measures non-GAAP release and financial measures Regulation of today's in morning contain the non-GAAP Included with also calculated in financial financial accordance Commission. Exchange this remarks promulgated by Our is release within reconciliation a and of meaning GAAP. Securities the press G the the comparable press with

ahead, With that to call over Rob Kay. introduction, like Rob. Please go the I'd to turn

Robert Kay

joining and morning, today. Good for everyone, you. Thank us you thank

a performance our U.S. actions operating by ongoing environment. exceeded once in results continued business and in the growth rebound analysts' dynamic on of that quarter core are We share the pleased focus drive expectations profitability our with by to and again supported to our driven our third

announced to to the perform quarters a the actions from an are unchanged existing last comparison preliminary we connection in our peers. ago The in amendment estimated us well abate, the we'll Term of of market Loan are which today positioning weeks to observing with few shortly. headwinds detail begin have for extension taken As further our several in and results results we quarter industry reported have the B been facility, the and discuss third we launch

walk quarter, $XX.X First, compared I results. sales million September delivered generated to net net the will ending period the we $XXX.X sales In in million. million our same through the In third XX, in in last XXXX, of EBITDA we year. XX-month adjusted period $XXX.X

in execution. and Our end performance reflects strong demand stabilization our continued market operational a year-to-date

We've Entering and also as stability in maintained fourth or our some in grown favorable availability mix by our our markets driven the and chain supply as costs. to expect see gross we markets. stabilization margin international U.S. quarter, percent, well relative core improved product

strategies in year-over-year we retailers ongoing recovery with retailer our quarter, our quarters, and in end markets. response of U.S. supply domestic on by impacts altering growth we the distribution business, of inventory significant purchasing prior channels discussed For the core supported have issues across behavior, delivered the chain oversupply. global to continued In

shipment our experiencing macroeconomic monitor flow markets, year-over-year positive pressures. such been have revenues we as positive forward. recessionary to these that see order a and continued resolved. said, confidence We for We to and since seeing return the we we giving levels us we time trends move sustained in are first as are remain as issues factors now while defensive ordering That hope XXXX, inflation comparable activity typical all in

environment ocean mix year, and freight of Of positive goods our on quarter the reducing prior also gross combination remain We supported favorable focused cost factors. note, to margin improvement, by remains a cost sold. which the driving was in macro of

business. International our to now Turning

initial the our execute to European with gaining despite we end traction markets. are strategy pleased challenges continue We are international ongoing in growth and

have which allowing the We including from in infrastructure for investments and this Netherlands our win our already business, on we us is continent. made to are the facility, benefiting better compete

wins retailers new including in key X the several in large Europe. new business Continental quarter, saw We

structure, terms improved of restructuring European our In in continues impact fourth completed bottom strengthening XXXX. we this towards the of positively the for segment forward our of to we as foundation line, goal our cost our quarter in XXXX operations of drive profitability

Zealand such we following a Outside go-to-market change the translate progress will implementation seeing of and Australia we encouraged also by of direct last strategy. significant are Europe, This are in quarter's to New margin Shopee, improvement. among Alibaba channels markets. our are strategy in out In Southeast consumers strong e-commerce-driven across we roll seeing these activity and to and Tmall, continuing as are Asia, lease

rollout we driven shares continued growth including to geographies, key growth as Mikasa, work our strategy brands, direct our the opportunities beginning are is go-to-market KitchenAid, note, plus X creating major top And in by bolster share expected of provide our line. XXXX. to successes and several top strong. that in market core S'well initiatives our remain of market pleased with Of support The line position, the in incremental strong we

made investments which market gain for we share. have infrastructure to XXXX, in significant continues Throughout business, our foodservice

seeing to efforts drive begin that these will pay are meaningful growth profitability off, confident and We in are and they XXXX.

of signed across license we that products categories. mentioned we quarter, Parton-branded for several line a Dolly last Separately, a

we the products incremental many adding new begin gained placement. We of line shipments with half categories Therefore, second have growth, XXXX. this to beginning are expect already across and adding in

saw into we continued continue In expect third momentum the this in we quarter, will strengthening fourth and quarter. the e-commerce, pure-play

chain our an to execution China. our to reduce efforts on sourcing Now strategic update provide of the exposure supply our diversify to and

are we our which of exceeding supply approximately as ago, reduce to goal such originally to was We spend the XX% or our months way X is goods of product meeting outside on set on well our China.

is facility capabilities full further plastics in as Asian in expectation we the we now end, Other that invested sourcing Mexico identifying geographies well XXXX. to initiatives operational, that expanded to as sourcing include opportunities with capacity continue that To Mexico. production up various will expand, and continue in manufacturing ramp we the reach by we

now outlook. our Turning to business

executing While the with revised combined our our and of are to million range XXXX. due year our full $XX positive EBITDA XXXX We on have raising the confidence these sales full year produced quarter, $XXX still range outlook a the end million positive to uncertainty million To now adjusted year-to-date, provided there macroeconomic performance, of tailwinds and of million. the guidance. to with the in trends reflect have is low fourth us we we factors, in the expect net in $XX that $XXX

commitment ensure strong forward financial and of remain conservative conservative line sheet in balance with and our sheet our We position maintain sheet to are commitment in to management deleveraging our we line strength our moving management. with to balance with disciplined approach balance pleased in cash the to -- our management

of This through amendment March quarter, maturity an in an extended due of of XXXX. we extension our and existing launched was XXXX which Loan Term facility, August B

environment, fourth and this the Given is to over quarter. our refinancing facility uncertainty the years. in prudent minimize amended the this it the participation event ongoing to next proactive we exposure we several risk steps in macro believe the to At expect like have during finalized close the point, to take this

it once We the provide transaction will update closed. has to an

for our We continue in with line investing to to including evaluate commitment growth. opportunities, M&A, value-enhancing

sheet. increasingly and of only we support and we growth amendment on will translated While that to the attractive our strong Term Loan best bolster balance in remain believe valuations, prospects. will pressures our believe act the B and cost of current those opportunities capital We our on availability extension disciplined to anticipated long-term market serve have our

value continue to to be we see We expect our investment prudent with and capital be enhancement. opportunistic initiatives where with

We over in the are improving the even enter have we confident pleased quarter. us and macro we With last in place accelerating success positioned model trends the the over the operating progress. Larry. business our are significant for fourth headwinds, of that, call transformation The face I'll to our turn as continue several we years have completed are business we and seeing across with now to strategy the in we environment has the and

Laurence Winoker

Rob. Thanks,

or Vasconia for third diluted year the to the compared prior million include charge our -- investment Grupo of As investment in $X.X reported $X.X each quarters equity income XXXX. in quarter $X.X to XXXX. $X.X and $XXX,XXX per or million, Net $X.XX was share the to diluted or and a this of of was related per of share noncash $X.XX third or net for $X.XX impairment share quarter compared morning, diluted a $X.XX in share income per net diluted 'XX million Adjusted respectively. per $X.X the for quarter million loss XXXX current million of income net third

ended $XX.X million net income, months XX, September measures, from Adjusted release. XX million XXXX. compared third operations before adjusted operations 'XX operations to from to EBITDA to from 'XX $XX.X in million million and was the adjusted $XX.X of quarter our reconciled in in EBITDA Adjusted XXXX adjustment. which income a GAAP 'XX for trailing $X.X financial the are forma non-GAAP are measures third And of financial was quarter the period. was earnings adjusted Income synergy income as million in the the in compared $XX.X pro

unless increased by by are Consolidated 'XX segment and sales X.X% the stated sales The following million. of otherwise. X.X% $XXX.X for XXXX. third increased 'XX, quarter from comments U.S. to

partial warehouse the quarter retailer as continues continues As current behavior drove products. from lower offset Rob well a to increase, as U.S. business normalize. discussed, our to purchasing sales and factor, rebound, hydration new for with core This a program,

the International U.S. as of driven percent market and -- segment XX.X%. weakness go-to-market demand, The million were from sales Gross from on down in of in the increased decrease a implementation XX% XX.X% new down dollar constant to margin by continuing $XX.X basis. to strategy customer Asia. or is end expected, shipments, XX.X% timing

XX.X%. due margin U.S. freight is lower product increased inbound the XX.X% from For and gross improvement costs. mix to segment, to favorable This

decreased inbound costs. margin benefit to mix, points the XX of offset from product lower gross international, which For unfavorable XX.X% basis freight

XX.X% expense. and improvements wage from warehouses, For percent were storage driven a of offset and by Direct higher last productivity This expenses, rates. year. excluding labor expenses as the nonrecurring U.S., lower X.X% goods was talent shipped its decrease distribution

from For effect warehouse by of was of outbound lower lower The XX.X% freight operations. International distribution year. shipments benefit on XX.X% goods partially versus expense percent the as the offset shipped rates warehouses a last was its of

of to administrative compensation $XX.X incentive expenses And sales, versus to as to a and U.S. million increased the XX.X% $XX.X increased attributable percentage in to 'XX was increase expenses primarily general net from increased million accruals. timing million. million. Selling, by The XX.X%. SG&A $X.X $XX.X of segment

from decreased to SG&A international, lower by For million foreign expense $X.X losses. exchange currency X%

percentage As to a expenses lower volume. effect of International segment sales increased expenses due on XX.X% the of to XX.X% from net sales, period

increased in salary decrease the incentive of to on Executive $X.X expenses $XXX,XXX elimination position. corporate million offset compensation a costs by the by of partially timing Unallocated due to Chairman accruals, the

interest higher borrowings. rates our to Our variable due debt, increased on interest expense by offset partially average rate lower by $XXX,XXX but

income XX%, the tax income due taxes, statutory no XX.X% quarter, benefit tax was losses the rate which tax which operating For effective primarily current to is of for foreign income differs rate from recognized. federal the for

will write trading payments. its $XXX,XXX to Grupo a stock losses loss down charge Related it not an recorded continues million. loss its Vasconia, million company to interest, a equity of to $XXX,XXX $X versus additional 'XX Furthermore, company its announced we for price recently and XX.X% the of Accordingly, company Vasconia quoted investment recent of period a noncash to history service a which debt have has last impairment the the $X operating Mexican year. recorded the decline. a value make in of of

continues liquidity debt comprised million lower of on $XX sheet and our the at $XXX.X September Net be which receivable ratio debt-to-EBITDA leverage was $XXX.X facility And balance credit was million, than our and XXXX. cash under hand. strong. And approximately million, agreement was the approximately X.Xx. availability of our to XX, net end was purchase At

commitments we commented, will $XXX extend Loan and priced report August that September of effect and agreement B be required have bears to filed Rob we $XXX very received The which after ] be would pro XXXX. approximately is after basis, are to expected The our a interest XXX. at closing, As shortly. plus Term million at agreement to amend be the amount pleased definitive will XX, SOPA forma principal liquidity On the OID amendment, million. to giving as [ XX

net concludes income questions. Guidance EBITDA to operations discussed of $XX.X XXXX line full million sales we of adjusted adjusted to million, million for million updated $XX.X $XX.X and $XXX Operator, in of $XX.X financial $XXX release, as our million, million guidance. net guidance, our $XX comments. is to please the income from $XX XXXX to million. low adjusted of prepared the of the open million our have As year follows: end for raising This

Operator

our with D.A. the And of first from Bolton-Weiser Linda Davidson. Instructions] [Operator question comes line

Linda Bolton-Weiser

you? How Hello. are Yes.

Unknown Executive

yourself? And Good.

Linda Bolton-Weiser

Good, good.

So I some that normalized, are seeing about your out we're to but doesn't hear the consumer curious patterns there it's good ordering about demand. information was match more of -- that weak

So continuing in change their you your if retail customers be they behavior POS I'm see behavior may wondering demand. the weak here, -- terms may as consumer of

you be kind of things versus still a environment? those the better weak seems to what terms can So of X in square ordering very

Robert Kay

demand every each right, the that that out order environment is every X independently, And across ultimate some there the a was addressing normalized. environment are because retailers inventory of those addressing saw time there over from POS So that demand we has mismatch where pointing really channel, and order we for was tremendous between channel. in

shipments creating brick-and-mortar, whether is whatever. Relatedly, seeing robust. separately, but to the pickups ultimate So there still market or and mismatch like market omnichannel off-price. channels not situation, because is We're is which demand the e-commerce, in certain -- end it's no overstock end

because year had buy position to because If in put demand coming too a been And buy where much on off more with was right? there mismatch there POS. year or created channel that meet So base, they inventory, low last look right, that in open you to of a positive. that a to wasn't much them that's basis, a their lower little very base that's

therefore, robust their lower compensate larger, and already and taken earlier we seeing shipments end POS retailers were more this to to year market So are lower sophisticated that seeing. lower not stocks for action still they demand, have safety a the

be it consensus holiday season, bell different. right? is The be which decent a the [ in that visibility, little the will believes, and For right, ] season, NPD what no [ IRI Sircana will in there's now, the probably curve, ] holiday more [ curve ] but discounting a is

Linda Bolton-Weiser

in progresses? growth think next up, that it so mean gradual -- you the a sound you is as the pointed XXXX. really building then year? Starting optimistic of part you as year lower I the in of that Do improvement then -- have And see year about should we growth Okay. the in you'll and towards kind sales that being first for way

Robert Kay

visibility we're toward So market said -- not counting core. the end another the way, is

know So don't, either. figure maybe where We I out that's the someone else can and going. think don't retails

U.S. In particular, if in pretty in So the in we're end and anticipating no will any, -- international XXXX rebound, me, excuse not we're convinced there markets, in U.S., XXXX, XXXX. much be markets. the and the rebound not until

we in in triple broader up meaningful is to which The obviously, we're we're strategy a Zealand, us, going doing gain retailers. to sells market things at provide market profitability. a level share of in is significant a New It actually. Australia decent for -- will will But growth and because share. base that are help market are picking which much how big that's we're gains, some go-to-market -- changing through, Europe, And market if now selling retail

just kind selling core business lot. XXXX, lot base. [ importantly, a we've gets that We've The Parton more ] of line profitability in you what food increase and that sixfold as if in annuity of that, look is our expecting it segment. we've in it's service, us importantly, low in you built a developed we're to a on at start getting More an Dolly market, business done in work. -- But

landed start already placement, shipping quarter. expand. think early we will which will have second We as That

If are. been above result But market grows, So our these current we've your that are working as initiatives will these end up, be yes, things. point, what expectations it build will for built-in a the on. that of

Linda Bolton-Weiser

annual then how the any interest to And would expense? refinancing affect estimation as you have do Okay.

Robert Kay

offsetting, -- almost let comment, remember, factors The another about in but if Loan million. look B, offsetting a we're -- recently. the bought we you back And are this, conjunction million at -- Term $XX Larry the discount at of I'll fairly also repaying $XX almost with some

has the much of higher. outstanding rate but Loan interest B the Term the So is declined,

Laurence Winoker

Yes.

amount the close in -- position, that is is X.X when As what calculated the back saved pretty did auction we've we million, approximately which close June. Rob pretty we said, to which

Robert Kay

So higher [indiscernible]. of downsized interest so the expense, overall of on Loan Term we the they indebtedness the amount B, but kind

Linda Bolton-Weiser

luck you everything. very with Good Thank much. Okay.

Operator

Our Company. Sidoti the with Lebiedzinski comes next Anthony & question of from line

Anthony Lebiedzinski

U.S. growth it's Nice nice the job. here. Certainly, to sales in see quarter

at versus just as pricing look call there? thoughts unit we you So out if curious, curious have just anything volumes, any that? to Or on

Robert Kay

-- mean, higher an impact on and of helped the has sense I Look, Yes. getting of right? more you're The is inflationary environment us, impacted, But same a volume that. sales of the for basis. mix from

third big which had hurt quarter that So So -- helps But club, in in like mix volume. the mentioned, margin. a volume right? but for we're program right, margin percent, in year-to-date we hurts helped Larry club, down,

Anthony Lebiedzinski

Understood.

you. Okay. Got

Okay.

the So your if use 'XX sales midpoint of were we guidance. updated to

implied guidance fourth of is X% quarter of the year. So the decline revenue from last

international really that that all down? is is So that driving

Robert Kay

it's No. club. Actually, Anthony,

So driving fourth not had a program year, that. year. we're doing we And quarter which really this of that's last big in

Anthony Lebiedzinski

Okay. Got Got it. you.

as International And Okay. as then curious the just far segment.

So of had the there. mean segment? International Strategically some explained. not in you quarter, longer how term, and that potential the admittedly, first think obviously, challenges were sales quarter, time this here you it as the was do about I the kind for you down

about International do on you segment longer this how guys think So the term?

Robert Kay

We along it's Brexit then Look, business. a the That's war on our over put it's factors. we've over many Ukraine in on dependent a position, heavily it -- since as earnings took major impact and really very it. tremendously U.K., the we've drag had a been with question. pertinent a And on we grown restructured the other

to need be comfortable. we to So restructure Ultimately, we've continued that.

gains, doing and The what greatest some I opportunities, we're I probably retail So we're continent. mentioned gaining growth of in Australia of mentioned we New and and on are the traction. our potential and is places, other is Zealand X the winning the growth there.

share firmly So our in a we need to we and are very very path obtaining need comfortable gaining to market. We other be profitability actions. or take in depressed long-term

Anthony Lebiedzinski

Okay. Understood.

lastly, improvement And gross Okay. there. margin, nice then

forward? here to should additional curious we in margins expect going whether gross Just as improvements

Robert Kay

bump No. any percent. comfortable trend gross will improved But Look, We're see and margin don't channel we profile we've continuing mix else our don't over few margin anything -- of meaningfully we over years. still quarter. sustainable, it but gross given upward last or the a expect in because

Operator

line from And our question the Canaccord next comes Genuity. with Brian of McNamara

Brian McNamara

think think you've answered. already last my lack a the a I mentioned been visibility quarters. But of of lot questions Rob, couple have I of for

Now I'm why time. just mileposts a of look kind is Is unprecedented? do typical different? you time out moving data forward? curious, market long inform business your And you've been typically in to kind of the for growth points, view this Like this what

Robert Kay

something Well, lot we've of fought will the to which accelerate, environment, general it's Trade there's and just a inputs what's the over couple years. of is last and macro wars, going happen. that

weather, For can't that's it's going Europe tremendous of the matter, because very the impact predict costs. we that a of to negatively winter, particularly but fuel impact cold

variety So there's of a factors.

I think fairly unprecedented. it's

we've years. certain over that are things seen There the

the asked by levels. in back question That's sophisticated inventory Linda terms paring terms when So retailers of of in basically reaction the standard.

departments within Target, sophisticated very their sophisticated, Walmart, the they're very and are So organization. powerful very financial

in a safety burden they don't right, our it's business. stocks, we've up on -- makes us before over our times warehouses, side care tough So because economic the to press, put shift we indicator the and really see if inventory it tighten we seen because guys of those of really leading

Let risk, right? us take the

that but -- lot and So occurring we a of that. saw started XXXX, in shift

the But historically. is understanding of not to channel visibility. data on looking in data, flow, there's by There's the no metric and winning is at normal general We normal these of us, some term, what really and back Paring trends order are -- order terms why. There in look over channels and best us right? no firm to But long the is very firmness just we inventory normal. like. the right, is choppy. market So times flow POS recessionary at are for

right? buy. to the in buy, I not X frankly, They mentioned, nicely, rectify moment. it's there planogram, had so frightening to need money And It XXXX. It's As did driving situation no a you buy, we've open no which growth at of our grown was to the channel, this been things open in off-price, good year. is

Brian McNamara

there, are you then And Great. have mean, for guys think everything, done ton and growth investors but restructuring there. International, on I work I looking a of

in would investors So X return what can quarters kind curious mentioned like consecutive double-digit have QX. of kind and to wins? wins -- your think been a are declines, just I hefty of without And expect you pretty business new when new those growth there? I'm business growth like

Robert Kay

Yes.

talking flow statement. the in all The to year-over-year, meaningful. started about wins that profitability So Zealand the the haven't changes yet those we I'm and made We've shipping. and is we but and through improvement New gotten wins, that in Australia have income

Brian McNamara

of we least XXXX Got -- before to estimates guidance. it. at revenue aggressive? peers' lie midpoint just, Is think on And X% I consensus then the growth, mean, or touched that I revised and about that's expects the my myself your relative current

Robert Kay

issued not XXXX on guidance have We yet. our

Brian McNamara

share We've a And lot been of our talking companies. to XXXX. kind gotten has comments? other theme Basically, down care the from high-level any coverage

Robert Kay

Yes.

much initiatives where But impact, we finalize we're we'll any market I bunch of 'XX. before, from. see We get a growth that's end Look, and Brian. haven't that in as have growth issued but working not to guidance, mentioned expecting the we're

Brian McNamara

right. All

Sounds good, of Best guys. luck.

Operator

for the remarks. call reached Kay of question-and-answer closing have to we turn And over the the Rob now end session. I'll

Robert Kay

]. day. Have Shamali call, Brands. our people shortly. interest listening a look [ and thank in again, you you good we for be for to your Thank Thanks, Once Lifetime to updating

Operator

at Thank And today's for your your may and time. this concludes conference, you disconnect you lines this participation.

Lifetime Brands (LCUT) 9 Nov 232023 Q3 Earnings call transcript